FINANCE 'Substantial risk' to costs now posed by final salary scheme

Published: 30/06/2005, Volume II5, No. 5962 Page 12

Trusts will have to fork out more in pension contributions if the final salary scheme is not ditched, NHS Employers has warned.

NHS Employers pension project manager Tim Sands said managers did not realise the 'substantial risk' the future pension scheme would pose to their costs.

And he told delegates at the recent NHS Confederation conference that employers had a 'real understanding gap' about how pensions are now funded.

'As things stand at the moment, you as employers will have to pay more. This is a problem people haven't fully registered. Up until half a year ago you didn't pay the full cost of pensions in the NHS; the government picked up some of the cost, ' said Mr Sands.

Among the controversial proposals for reforming the NHS pension system is to move from a final salary to a career average pension scheme. The debate will resume soon after talks with unions and employers stalled before the general election.

Mr Sands added that managers were 'now in the world of three-year spending settlements', where funding had been devolved and costs were now picked up by employers.

'We are talking about a substantial risk on employers' costs and my belief on this is that the government is not going to say, 'We are going to reduce our expectations on the NHS', ' he said.

A four-year valuation of NHS pensions by the government actuary's department will be released later this year.

Research by NHS Employers found that every 1 per cent increase in the contribution rate will cost the NHS around£250m and will increase trusts' overall costs by around 0.5 per cent.

Speaking after the meeting, Mr Sands said: 'It is significant money for trusts, particularly in an environment where we expect spending settlements to be tighter in the future.'